Stocks Gain as Focus Turns to Fed, Yen Rebounds: Markets Wrap

(Bloomberg) — Stocks rallied as earnings optimism offset concern about higher-for-longer interest rates. The yen rebounded after dropping to its lowest in 34 years.

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Europe’s Stoxx 600 added 0.3%, with shares of Royal Philips NV surging 37% after reaching a lower-than-expected compensation settlement in the US. Contracts for the S&P 500 climbed 0.2%. Ten-year Treasury yields fell two basis points to 4.64%, while the dollar weakened.

Strong earnings for Microsoft Corp and Alphabet Inc. toward the end of last week helped lift US stocks to their best weekly gain in 2024 even after data highlighted sticky inflation in the world’s biggest economy. With earnings season in full flow, traders have the Federal Reserve’s policy meeting on their radar Wednesday.

“FOMC is bound to row back hard from its earlier predictions of meaningful policy easing this year,” Societe Generale economists including Klaus Baader wrote in a note to clients.

Meanwhile, the Japanese yen recovered after earlier falling past 160 per dollar. Thin liquidity due to a public holiday in the country was cited as a reason for the volatile moves. Top currency official Masato Kanda said “no comment for now” when asked by reporters whether or not he intervened.

In US markets, swaps traders now see only one Fed reduction for all of 2024, well below the roughly six quarter-point cuts they expected at the start of 2024. A gauge of US Treasury returns has slumped 2.3% this month, set for the biggest monthly drop since February last year, as hawkish Fedspeak and strong economic data pushed back rate-cut bets.

Read More: 60,000 Headlines Show Powell’s Hawkish Pivot Has Just Begun

The Hang Seng Index jumped more than 2% as Hong Kong’s benchmark equity index headed for a technical bull market after a surge in Chinese property shares added fresh impetus to this month’s rebound.

China’s central bank has advised some regional lenders to curtail their ultra-long bond investments to mitigate risks, people familiar with the matter said. The latest directive follows similar…

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